This article is written for new traders to get started, from
deciding how to enter, to the exit of a trade and most importantly, managing a
trade. Instead of focusing a lot on technical indicators, I would like to share
on the use of simple candlesticks charts (you may set candlesticks as a chart
setting. In my personal view, simple things work best.
Determine your Entry
1. Using candlesticks pattern
Bullish sign – To Buy or Long
Bearish sign – To Sell or Short
2. Price concept
Fundamental concept, a trend can
never start nor continue if prices doesn’t go higher high, or lower low.
Buy or long when prices goes
higher, sell or short when it goes lower.
3. Combining Candlesticks pattern and Price
Buy on 1 pip higher, sell 1 pip lower
(this is for intraday charts, if you are using a daily chart, you may want to use
wider pips). I will be using 1 chart as an example all the way from the entry of
a trade till the exit.
Position your Exit
Move Stop-loss to breakeven level once price
moves in your favor
Tightened Stop-loss price to the new price
whenever a new high / low is form
New reversal candlestick pattern is formed
1a. Previous (&
nearest) resistance/ceiling Price for those who bought/long
(& nearest) support/floor Price for those who sold/short
price using Stop-loss strategy until stop-loss price is hit
candlestick pattern observed (example shown below)
Manage your trade
In my personal view, the hardest part of trading. Discipline
I cannot emphasize enough on the importance of risk
management in trading.
One idea for capital to risk may be 0.25% - 1% of your
capital for intraday trade, and 2.5%-5% for position trade which may last for days
Now, risk management for capital to risk is used to determine
the amount of capital you would want to put in per trade. Together with an exit
point (aka stop loss level, amount of points to risk), you can calculate the actual
size of your trade.
Base Capital - $100,000
Capital to risk per
trade – 1% of $100,000 = $1,000
Stop-loss level of potential trade – 100 pips = 0.0100
Size of trade - $1,000 ÷ 0.0100 = 100,000 units
I have yet to hear of a strategy that gives a 100% hit rate.
Since we can’t control the market, the very least is to control how much we can
lose. The lesser we lose, the easier it is to come back into the game.
Move your stop loss further and further away?
Cancel it altogether and “pray” for a rebound?
Increase losing position?
Move your target profit such that a 3% target
profit becomes a 300% target?
You get my idea.
Conclusion: Things to Note &
It is always advisable to have a take-profit
level, even better with multiple take-profit levels.
Beware of news release that increases volatility
(you may find it here http://www.dukascopy.com/swiss/english/marketwatch/calendars/eccalendar/).
That causes a lot of wild price swings.
This trading concept is also meant for anyone who
doesn’t have access to a chart system(although highly unlikely), using just the
prices of Open, Low, High, Close (OHLC) of the previous 2 days or bars would
Make trading fun and a life-long learning skill.
The reason FX trading is so popular is also due to the fact that it’s running
24 hours a day, 5 days a week. Trade the way that suits your lifestyle and
character, not the other way round. Don’t go for a positional trade which last
for days and weeks if you are the trigger happy Rambo type always wanting
action, and vice versa.
I hope this article has managed to help or re-emphasize
on some important criteria for successful trading, as it has done for me. There
is still so much more that I hope to share. Till then, happy trading, cheers!!